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Non-Banking Financial Companies (NBFC) operate similarly to banks but do not possess the legal status of a bank. Registered under the Companies Act 2013 and governed by the RBI Act’s section 451(c), NBFCs primarily deal in loans, share acquisitions, and government-issued stocks and bonds. Unlike banks, NBFCs are restricted from accepting demand deposits with a few exceptions. Although their financial activities mirror those of banks, they are distinctly different from institutions engaged in agricultural, industrial activities, or the sale and purchase of goods and real estate. They are overseen by both the Ministry of Corporate Affairs and the Reserve Bank of India (RBI).
Nonbank or Non-banking Financial Companies (NBFC) registered under the Companies Act 2013 are working like a bank defined under section 451(c) of the RBI Act. They do not possess any legal status of a bank and work in the market to provide loans and advances, shares acquisition, stocks, bonds, etc., either issued by a government or any such authority. And being restricted from taking demand deposits except in a few cases from the public as the banks can accept.
It’s totally different from that institution whose primary business is in agricultural and industrial activities, either the sale or purchase of any goods or related immovable properties. They are controlled by both the Ministry of Corporate Affairs and RBI.
Non-banking Financial Company’s (NBFC) full form shows that NBFCs are separate from banks. NBFCs usually perform financial activities like lending loans, advances, share acquisition, stocks, bonds, etc., issued by government authorities. They do not possess the rank of the bank. In order to carry out a similar financial function to a bank, NBFCs need to obtain an NBFC license, and their principal business must be receiving deposits in terms of instalments or any arrangement within any scheme.
NBFCs can be classified on the basis of Liabilities and activities.
On the ground of deposits/Liabilities-
In India, there are different existing establishments carrying forward financial activities, and they do not require licensing from RBI because such existing establishments are being regulated through other financial regulatory bodies. Neither do they require any license from NBFC nor RBI. A list is given below-
Generally, NBFCs follow a similar working pattern to banks in terms of financial activities, like providing lending services to borrowers and making further investments in the market. It’s somehow on the point that NBFCs function similarly to the bank. Although, NBFCs differs from a commercial bank as they do not hold the title of a bank. We will make clear how they differ from banks under these categories-
NBFCs are listed on the official website of the Reserve Bank of India at www.rbi.org.in. Simply visit the sitemap and check the NBFC List. The RBI is used to provide instructions regarding the NBFCs on a regular basis and can be availed on the official website. Visit Notification, Master Circulars, Non-banking and check the official gazette notifications of RBI.
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